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Large Number of Expats in GCC Lack Retirement Planning

GCC expatriates are miles behind their counterparts in North America, Europe and Asia when it comes to retirement planning, a study by global financial firm Guardian Wealth Management (GWM) has found. In fact, in the annual pensions survey conducted by GWM, it found that 64.21% of GCC expats have no pension at all. This is compared to 14.49% in North America, 43.85% in Europe and 61.11% in Asia, a statement said.

Guardian Wealth Management, who have eight offices around the world including Hong Kong, Geneva, London and UAE, surveyed 2,000 respondents online about the type of pensions that they have currently.

Hamzah Shalchi, regional manager in the Middle East, said of the findings: “From last year’s study we find out that most savers are not saving enough for their desired retirement lifestyle, but this year we discovered that over half of expats don’t have a retirement fund at all which is truly shocking.

“I believe GCC expats are quite far behind other expat regions such as Asia and Europe because the high salaries and tax-free incomes make it much easier to spend earnings rather than save them. As with most cases, people come to work here and before they know it, it’s been five years and they haven’t saved a penny”.

In addition to 65% of GCC-based respondents saying they have no pension at all, 24.21% said theirs was based in their home country such as the UK. This is still far behind expats in North America as the survey found 81.16% of respondents still had an active pension in their home country, whilst 50.27% of expats in Europe and 31.11% of expats in Asia had home pensions.

Shalchi commented: “The reason for the worrying lack of pensions back home could partly be because of the demographic of expats in the GCC. As is the case with foreign workers in places such as the United Arab Emirates, many are under the age of 30 and certainly 40, meaning they may not have necessarily started thinking about saving for retirement.

“However as was seen in last year’s survey there is quite a disparity between what people think they need to save for retirement and what they actually need to save for their desired lifestyle. Due to compound interest, it is better to start saving earlier but for less time to allow the pension pot to grow naturally”.

Another option for expats is to transfer their pension offshore which is one area GCC expats are leading the way in, with 11.58% of GCC respondents saying that they had moved theirs offshore. This is compared to 4.35% in North America, 5.88% in Europe and 7.78% in Asia.

Due to the lucrative benefits such as greater tax efficiency, better returns and flexibility, transferring pensions offshore was starting to become a popular option for foreign workers in the GCC, particularly from the UK. However, recent changes to UK tax law has imposed a 25% transfer fee on Qualifying Recognized Overseas Pension Schemes (QROPs) making this avenue of saving much less attractive.

“The announcement of the pension transfer tax in the latest UK Spring Budget has largely killed the QROPs market and this will affect any transfers from March 2017 moving forward. However, there are various options such as Self-Invested Personal Pensions (SIPPs) that may be better suited.

The most important thing is to seek professional advice and actually start saving! With life expectancy and inflation going up year-on-year, this should be a priority for savers”, concluded Hamzah Shalchi. Guardian Wealth Management offers financial advice, specializing in long-term financial planning for its clients, it said.